Taxation of the financial sector: Is a bank levy the answer to the financial crisis?

Abstract

To reduce the probability of financial crises, policymakers have introduced bank levies, whose application differs across countries. The problem in their use lies in identifying the most effective regulatory instruments to reduce risk. Our study might be of interest to various researchers and professionals, as we discuss the significance of research on bank levies with respect to theory and economic practice and then propose models of banking sector taxation and directions for future research. Moreover, this paper presents the history of taxation of the financial sector, the models introduced in different European countries, the advantages and disadvantages of each of the possible solutions, the results of studies on the impact of the new levy on the behavior of the financial sector and recommendations for how the levy should be structured.